As businesses leverage the advantages of artificial intelligence (AI), the demand for cloud infrastructure is on the rise. According to data from the International Data Corp. (IDC), spending on compute and storage infrastructure products for cloud deployments increased by 2.9% year over year in the third quarter of 2023 (3Q23), reaching $25.4 billion.
The IDC observed a significant enhancement of cloud infrastructure among organizations, while the non-cloud segment of the industry experienced a decline of 8.2% in 3Q23, totaling $14.9 billion. Despite a 23.9% dip in unit demand for cloud infrastructure, there was an increase in average selling prices (ASPs), primarily attributed to higher-than-usual GPU server shipments to hyperscalers.
“Cloud infrastructure spending continues shifting towards robust configurations aiming to address more complex workloads and supporting new AI initiatives,” said Juan Pablo Seminara, research director of Worldwide Enterprise Infrastructure Trackers.
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In the third quarter, spending on shared (public) cloud infrastructure reached $18.5 billion, reflecting a 7.2% increase compared to the previous year. This category accounted for the largest share of spending (45.9% of total infrastructure spending in 3Q23), surpassing dedicated deployments and non-cloud spending. Meanwhile, the dedicated (private) cloud infrastructure segment declined 7.2% year over year in 3Q23, totaling $6.9 billion.
Forecast
Forecast for 2023 anticipates a 9.7% growth in cloud infrastructure spending compared to 2022, reaching a total of $100.6 billion for the year. Non-cloud infrastructure is expected to decline by 7.7% to $58.7 billion. Shared cloud infrastructure is projected to grow by 13.9% year over year to $72.2 billion for the full year, while spending on dedicated cloud infrastructure is expected to remain flat (0.3% growth) in 2023, reaching $28.3 billion for the full year.
“The subdued growth forecast for non-cloud infrastructure reflects the headwinds the market is facing while cloud spending remains strong due to new and existing mission-critical workloads, which often require higher-end, performance-oriented systems,” the market intelligence firm said.
IDC’s service provider category includes cloud service providers, digital service providers, communications service providers, hyperscalers, and managed service providers. In 3Q23, service providers as a group spent $24.9 billion on compute and storage infrastructure, up 1.7% from the prior year. This spending accounted for 61.7% of the total market. Non-service providers (such as enterprises and government, among others) decreased their spending to $15.4 billion, a 6.3% decline year over year. IDC expects compute and storage spending by service providers to reach $98.5 billion in 2023, growing 8.3% year over year.
“While some caution remains in face of the economic and socio-political challenges ahead, the spending outlook for 2024 is very positive with growth centered on the expectation that cloud-based spending will rebound at a double-digit pace throughout the year.”